How to use Excel for inventory management

Want to see me run screaming from the room? Ask me to do anything in Excel.

Odds are, many of you reading this have the same visceral reaction to Microsoft’s spreadsheet software I do. There are two kinds of people in the world: those who love Excel and those who would do anything in their power to never open it again.

Despite my aversion to the program, there’s no denying that Excel is a powerful tool in the right hands. The sheer number of things you can do with the software is astonishing.

 Take inventory management as an example.

Small companies can track their inventory by hand. Large companies will find using a software as a service (SaaS) inventory management solution makes their life easier. What about the mid-sized company?

Mid-size companies are often too big for hand-tracking their inventory. They may not be ready to commit to full-on inventory management software. What’s their solution? Excel. 

Excel provides the perfect bridge between manual by hand inventory tracking and inventory management software. 

Today, we’ll talk about how this powerful tool can help you keep your inventory under control.

How do you use Excel to track inventory?

 Tracking inventory by using Excel can be as simple or as complicated as you want. You can add endless amounts of categories, different workbooks, complex formulas for calculations, and more.

The key to getting the most out of Excel as an inventory management tool is figuring out the right details to track as well as the categories you’ll use to separate your data.

Here are some suggestions for things to track:

• Description
• Barcode or QR code numbers
• SKU
• Location
• Bin number
• Units
• Quantity
• Reorder quantity
• Cost
• Inventory value
• Reorder flag

These are suggestions. Feel free to remove things that aren’t relevant to your business or add additional items you’d like to track. These specific categories will give you a solid foundation for building your inventory management spreadsheet.

You could stop here with your Excel inventory tracking spreadsheet. Many companies do and have success. 

If you’re feeling adventurous, you can take things to the next level and add calculations to your spreadsheet by taking advantage of Excel’s powerful computational tools. 

What are some of the most commonly used calculations on an Excel inventory spreadsheet? Try these for starters: 

• Quantity in stock
• Purchase costs
• Inventory value
• Quantity in reorder

Like your data tracking, these are basic suggestions. The beauty of Excel is that you can customize and configure it to do almost anything. If there are other calculations you’d find valuable for managing your inventory, add them to your sheets.

The real selling point of Excel is that it allows you to build exactly what you want, rather than trying to shoehorn your specific needs into a program that may or may not have the exact features you’re looking for.

Where to find Excel inventory management spreadsheets 

If you’re ready to take Excel for a spin as your inventory management tool of choice, the next step involves finding the right spreadsheet for you. The good news is you have options. Whether you want to build your own from scratch or find a perfect template, the solutions you need are out there.

 Here are a few options:

• Build your own spreadsheet 

If you’re already a spreadsheet wizard, building your sheet from scratch is a viable option.

By taking this approach, you’ll get exactly what you want and need because you’ll customize  it to meet your specific inventory challenges. The time cost is canceled out by the benefits of having a spreadsheet that conforms to your company’s inventory management requirements.

The potential downsides here are building a spreadsheet from scratch can be challenging if you have complex requirements and aren’t familiar with the ins and outs of Excel.

Building on that, your Excel knowledge may be a limiting factor in what you can achieve in your spreadsheet. If you don’t understand all of Excel’s functionality, you may not realize there are more efficient solutions to your inventory management challenges.

• Use a pre-filled template 

If building an Excel inventory management spreadsheet from scratch seems beyond you (or not the best use of your time), you can always opt for a pre-built template. 

Excel offers numerous templates for a wide range of needs. If you open Excel and search for “inventory,” you’ll find pre-designed examples that meet your requirements.

From there, it’s just a matter of finding one that checks the boxes in all the major areas you need, selecting it, and applying your data and information.

• Find a template online 

If you don’t find what you want in Excel’s templates, don’t panic. There’s an entire world of templates available online. 

With millions of users, the Excel template community is full of spreadsheets others have designed and used. Many of these templates are free. You find one you like, download it, and it’s off to the races.

If you don’t find what you need in the multitude of free templates on the Internet, there are paid options as well.

These spreadsheets are often more complex than their free counterparts. In the inventory management category, many offer functionality on par with inventory management software, only minus some of those programs’ key features. 

 

Excel inventory spreadsheet pros and cons

Before we wrap up this section, let’s take a moment to discuss the pros and cons of using Excel for inventory management. 

Pros

• Cost

With free options available both in Excel and online, it’s not hard to create an inventory management spreadsheet without blowing up your budget.  If you’re operating with thin margins and low revenue, Excel can help you manage your inventory without breaking the bank.

• Customization

One of the things Excel advocates love about the software is that you can (with enough brainpower and sweat equity) make the software do almost anything.

This level of customization means that businesses can create an inventory management tool completely suited to their exact needs, presumably without  making major compromises along the way.

• Communal

Excel spreadsheets are easy to share with other team members in your organization. You can share them through Dropbox and other platforms, save them to the cloud, use Google Docs, and so on.

This means your spreadsheet is accessible by team members anywhere, at any time.

Of course, no solution is 100% perfect, and Excel is no exception. Here are some of the cons you should be aware of before selecting this solution for your inventory management needs.

Cons

• Complications

Most Excel spreadsheets begin life as manageable documents.

However, as your business and inventory grow, so will your spreadsheets.

We’ve all seen the unwieldy spreadsheets out there, the ones that run 100+ columns across the top and thousands of cells deep. These sheets are nightmares made a reality, documents capable of choking your computer every time you try to load one.

Bloat is a problem anyone who uses Excel for inventory management will have to contend with at some point. Sooner or later, the spreadsheets become too big to be useful.

• Time 

Creating a spreadsheet, inputting formulas, and adding data all take time. Maintaining the spreadsheet is yet another time sink. All of these hours add up. 

Inventory management software automates a great deal of the stock management process for its users after the initial software launch. Excel requires a more hands-on approach. There will be times when those hours could be better spent elsewhere.

• Data

If you’ve ever worked on a gigantic spreadsheet where multiple people have the power to change the document, then you’ve probably experienced data loss.

Accidents happen, people make mistakes, and spreadsheets can be complicated beasts. The problem with Excel is that sometimes when these mistakes occur, there’s no easy way to undo them.  

This can mess up your data. Sometimes you won’t even realize it until much later.

• Errors

Unlike inventory software, which updates barcode and RFID scans in real-time so your inventory numbers are accurate up to the second, Excel requires a great deal of manual labor in the form of data entry.

And as anyone who works with data entry knows, human error is a very real thing. 

The constant human element involved in using Excel means inventory errors are more likely with this approach than using inventory management software.

• No Real-Time Tracking

We touched on this in the previous point, but it bears repeating here. Excel requires human data entry on the inventory management spreadsheet. This means the sheet gets updated only when someone takes the time to amend the document. This can lead to problems.

Inventory management software updates your stock in real-time, without the need for data entry. Every time a barcode or RFID gets scanned, the software tracks the action. This means you’ll always be up to date on your inventory levels. It also reduces the risk of inventory errors.

Tips for succeeding with Excel inventory management 

If you opt to utilize Excel for your inventory management needs, there are ways to overcome many of the cons we listed in the previous section.

Excel requires more hands-on maintenance than inventory management software, but you can make it work by implementing some basic best practices. 

Here are some of the most common ones to track.

• Audit daily

We’ve discussed how human error is a real concern with Excel spreadsheets. One way to combat this problem is by conducting daily audits. 

By utilizing regularly scheduled audits, you can catch problems before they have the opportunity to compound over time.

Depending on the size of your business, daily audits may be an unrealistic undertaking. If this is the case, consider cycle audits, wherein you compare your physical numbers against your spreadsheet numbers on a regular, rotating basis. 

Another solution is to track your inventory both on paper and on the spreadsheet.

This seems like double work (because it is), but it will give you a daily count to compare to your spreadsheet and spot discrepancies.

The key here is that finding problems early is important. As counts are off for longer periods, the issues grow and compound.

• Update immediately

One of the biggest causes of human error with Excel spreadsheets happens when there are delays updating the sheet.

Here’s one scenario where this happens.

For whatever reason, your inventory manager has an issue that prevents them from making changes to the sheet as inventory shifts. They note the changes, but work happens and those changes are forgotten. Now your inventory is off. If you’re not doing daily audits, this inventory error could linger for ages. There could be more errors. Next thing you know, your entire inventory is wrong. 

The key to preventing these errors is to update your Excel sheet immediately whenever an inventory change occurs. 

We know work can be hectic, which can be challenging, but inventory errors make work even more hectic and challenging. Better to do the work now and avoid the problems later.

• Store backups in the cloud 

Your Excel inventory sheet is one of the most important documents in your business. As such, you need to make sure it’s backed up. As we’ve mentioned earlier, Excel mistakes happen, and sometimes vital data gets lost. 

By performing cloud backups regularly, you can lessen the impact of these mistakes by guaranteeing you have a recent copy to revert to in the case of unexpected catastrophe.

Be prepared. Mistakes will happen.

• Consolidate data for monthly reporting

One of the big flaws with Excel is that it makes analyzing historical data challenging. We can combat this problem by making sure you’re consolidating your data regularly for easier reporting.

By taking the information from your Excel sheet and transferring it into other formats (charts, tables, graphs, etc.), you’ll be able to spot trends and problems over time. This can positively impact your bottom line.

• Review data and outcomes

Data is great, but if you collect data and don’t utilize it to make decisions, it’s useless.

With an Excel spreadsheet, you’ll have a wide range of data available to you (and if you’re following the last point, you’ll have compiled that data into easy-to-understand formats). Use this information to inform your decision-making and forecast outcomes.

One of the goals of inventory management is to be able to predict trends and outcomes. Use this information to aid you in the process.

• Upgrade to a SaaS solution as needed

Excel can serve as an excellent bridge between hand inventory and inventory management software. However, as your business grows, there will come a day when Excel is no longer feasible as an inventory management tool. 

When that day arrives, understand that software solutions are  available to help you take your inventory management to the next level. Even better, many of these solutions offer a level of functionality you can only dream of with spreadsheets.

When your time with Excel draws to a close, don’t hold on. Embrace the next step. Change can be scary, but the right inventory management software can help you reach new heights.

Final thoughts

Excel may not be everyone’s favorite piece of software, but it’s hard to deny its versatility. 

If you’re a mid-sized business who’s grown beyond hand tracking your inventory, but you aren’t quite ready to dive into the world of inventory management software, then Excel is a legitimate solution. 

Whether you’re looking to create your own customized inventory spreadsheet or download a template, there are solutions here that meet every need. It’s just a matter of deciding what you need and finding the Excel sheet that fits.

Like any system, Excel is not perfect. Following the best practices in this article can help you avoid potential pitfalls while taking control of your inventory.

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